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SAIL, ArcelorMittal Rs 5,000-Crore JV To Be Finalised By May End, Steel Minister Says

The estimated Rs 5,000-crore joint venture between steel giant ArcelorMittal SA and state-run Steel Authority of India Ltd. (SAIL) is most likely to be finalised this month, Steel Minister Chaudhary Birender Singh said on Tuesday.

“We will finalise the project in four days and announce it,” he told reporters on the sidelines of a press conference in New Delhi on three years of achievement of the steel ministry under the Narendra Modi government. ArcelorMittal and SAIL had inked a memorandum of understanding in 2015 to look at the possibility of setting up an automotive steel plant in the country.

The proposed joint venture will construct a cold rolling mill and other downstream finishing facilities in India, touted as one of the fastest-growing automotive markets in the world with production expected to double between 2014 and 2020, from 3.6 million units to 7.3 million units.

The 5 percent tax rate on key inputs for steel under the Goods and Services Tax (GST) regime will boost domestic production, Singh told BloombergQuint on the sidelines of the event. He said apart from the ArcelorMittal JV, a project by Rashtriya Ispat Nigam Ltd. (RINL) in Raebareli is also in the pipeline.

Here are edited excerpts from the conversation:

There is a marginal reduction in GST rate for steel from 18.125 percent to 18 percent. Will this make a difference?

The bracket (5 percent) in which key inputs for production of steel are put, that is going to help the industry. As far as the 5 percent slab is concerned, the industry is certainly going to be benefitted.

Local demand for industrial commodities is not picking up along expected lines and the government’s protectionist measures are phasing out soon. When do you expect demand to pick up?

We, as a country, have to develop our infrastructure. We are not at that stage where there is meagre scope for development of infrastructure. I think at least 75 percent of India’s infrastructure needs are still to be developed.

So there is no reason for slow pick-up in demand. If you see the Budget figures, about Rs 4 lakh crore is placed for development of infrastructure... Roughly, if you take 10 percent of that component for steel, which will be used for infrastructure development this year, we would be having a sale of Rs 40,000 crore. This is how demand is generated. In certain areas, marketing is also important. I have told my people that marketing is not something where you cannot be innovative, you will have to be innovative, and you will have to have some R&D.

Many big steel projects are facing delays but you plan to achieve the target of 300 MT by 2030. How will it be possible?

No, there are no such steel plants where there is a delay. When we talk of modernisation and expansion of our PSUs, we have already completed all the projects. There maybe some [delay] in the expansion plan at Bhilai steel plant, but in 2-3 months, we will complete that as well. But the important thing is to have new projects and that is only possible when some transfer of technology takes place. We would encourage this transfer, maybe through some joint venture, or if someone wants to put up his own [funds] from abroad, he is at full liberty. He would be allowed to invest up to the FDI (foreign direct investment) limit.

So as far as incomplete projects or projects that are to be completed, there might hardly be any. What’s important is to see how many new projects will come up with this technology transfer.

Could you speak of some projects which are in pipeline?

There’s the project by ArcelorMittal. Then, there is a project by RINL (Rashtriya Ispat Nigam Ltd.) in Raebareli. There are also some private players who are thinking of adding capacities in existing plants.

One very important area [we are looking at is] scrap-based plants. Such plants can have the best steel quality. There is a general impression that if you want to have high-end steel, you must have it through scrap-based plant. So, there is one legislation which is pending in Parliament that over 15 year-old diesel vehicles should be off roads. If that gets clearance, then we will have sufficient scrap, we may not even have to import.

I would like to have such a plant in north India because there would be no need of iron ore or coal as such. So that plant can be put where 44 percent of scrap is available or would be available. I am thinking of the same thing in western states, that is, Maharashtra and Gujarat. There also we can put up a plant. If you see, 67 percent of our steel imports are from two-three western states. But all that is possible when this legislation is through.